Total market potential

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The total market potential is the maximum turnover that is available to all companies in an industry during a fixed period. Considering that the level of marketing and environmental factors are fixed. A common way to calculate the total market potential is using the following formula as follows:

MP = NxQxP

  • MP = the total market potential
  • N = the number of buyers in a specific product / market with fixed assumptions
  • Q = number of products purchased by an average buyer
  • P = price of an average product

So if 100 million people buy a book every year, and the average buyer buys three books a year, and the average price of a book is ten dollars, then the total market potential for books is three billion dollars.

(source: Free translation to Philip Kotler, Marketing Management, 1997. P. 135.)

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